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Obama Moves Fast - on The Road to the Past

A Quest for New Jobs Where None Exists

by JOHN WALSH

“Those jobs are not coming back.”

The late Steve Jobs to Barack Obama.

Hot on the heels of his State of the Union address with its emphasis on the moribund job market, Obama hit the road in search of jobs – but it was a road to a dying land. Pitching the idea of reviving jobs by revving up the manufacturing sector as the “number one priority,” Obama trekked about from Ohio to Alabama in a quest to find some factories with signs of life in them.

But Obama’s strategy is an absurdity, more fitting for the 19th Century than the 21st. Had he embarked on a tour of farms, calling for more jobs in agriculture, a “return to the land,” he would be considered a lunatic. And for good reason. Agriculture is a very small portion of the economy and everyone knows it. But the same is true of manufacturing. Look at this table from the U.S. Census of 2010.

Only 0.7% of the work force is employed in farming, fishing and agriculture. The total number of Americans employed in “production” (aka manufacturing) is about 8 million or only about 6% of the entire workforce (1). While not quite as marginal as agriculture, manufacturing comes close. Hold on, you may say, the low percentage of workers in production in 2010 is due to the Great Recession. No it is not. If you examine similar data from the 2000 census, the total percentage employed in production was only 9%. And 2000 was a year of prosperity before the recession of 2001 and before China joined the WTO and allegedly began to eat our export lunch, a ludicrous charge if carefully examined.

U.S. unemployment hovers around 8%. At least that is the “headline unemployment,” or technically the “U.3” calculation according to the Bureau of Labor Statistics (BLS). But the BLS calculates a much higher number, “U.6” which is about 15%, about twice as high as the “headline” unemployment figure found in the main stream media(2). Manufacturing, even in 2000 employed only 9% of the workforce and its decline in Great Recession accounts for loss of jobs for only by 3% of the workforce. How is such a sector supposed to employ an additional 8-15% of the workforce.? Obama’s call for a “return to the factories” is nearly as ludicrous as a call to “return to the land.” In a modern, developed economy manufacturing is a small percentage of the total. And that is as it should be. Moreover even as the number of jobs in manufacturing has fallen over the last 13 years, manufacturing output is increasing exponentially as can easily be seen by a glance at the second of the two graphs here. (Please dear reader, take a a moment to peruse this graph since it tells us that the decline in manufacturing jobs over the last decade is due in large part to automation – as opposed to offshoring alone.) We are increasingly being freed from that labor which is being taken over by automata. We should welcome that just as we welcomed the mechanization of agriculture.

Right now China and the U.S. each account for about 20% of the world’s manufacturing output, but that requires about 40% of China’s economy and only about 10% of ours. And for the U.S., with 4% of the world’s population, to put out 20% of world manufacturing is not bad at all. The U.S. already has far more than its “share” of world manufacturing. According to a careful study by the Federal Reserve of San Francisco, 88.5% of all U.S. consumer spending is on goods and services made in America. (Only 2.7% is made in China.) And considering only durable goods (i.e., manufactured goods), 67% are made in the U.S. and only 12% are made in China. This is quite the opposite of the views held by most Americans, stubborn myths badly in need of correction.

Steve Jobs warned Obama that “those jobs are not coming back.” Jobs, a man of some precision, chose his words carefully. He did not say that manufacturing was not going to return to the U.S. from its overseas locations. It may and in fact it will, depending on the advantages of producing close to the American market and the wage levels of U.S. workers. Of course the return of manufacturing jobs because of lower wages in America is not something to be desired – at least not if you are a working stiff. The U.S. minimum wage is now $7.25 per hour. The most sophisticated production robots work at a cost of somewhat less than $4 an hour. Robots work more cheaply. Inescapably, manufacturing will return only in an ever more highly automated form with ever fewer jobs.

This same dynamic is taking hold around the world. Look at the much discussed Taiwanese manufacturing firm Foxconn which turns out Apple products in China. Labor is in short supply in China, and hence the workforce is demanding – and getting – higher wages. (Given this fact it is quite amazing to hear “progressives” use the term “slave labor” with respect to China.) FoxConn is alarmed, and it has been moving rapidly to ever higher levels of automation. A few years ago it had no robots. Now it has thousands and in a few years Foxconn plans to have one million robots! The trajectory is the same as in the U.S.

As Mark J. Perry of the University of Michigan at Flint documents relentlessly and repeatedly, the share of manufacturing in the economy is going down worldwide – even as manufacturing output continues to grow exponentially. Ever more is being done with ever less human labor. In the developed countries the industrial proletariat is rapidly disappearing. And it is only a matter of time before the same thing happens across the globe.

These same forces for automation are exerting themselves in every sector of society. How many human personnel have you seen taking payments on toll roads recently? How many human voices have you spoken to when you call a large corporation on the phone? At the Mayo Clinic, robots have replaced humans in carrying drugs from pharmacy to bedside. And they are sufficiently sophisticated that they do not bump into anyone along the way!

So what are we to do? The answer lies in acknowledging that we long ago left the age of scarcity in the developed world. That was made clear a century and a half ago by the old boys in their classic work, The German Ideology. And the developing world is not far behind. The soundest answer right now is to begin a struggle for a shorter work week with no cut in pay – 32 hours work for 40 hours pay. For a work force of 139 million as in 2010, that translates into 34.8 million additional jobs, i.e., 25% more jobs.

A shorter work week decreases the hours of labor available to employers and exerts an upward pressure on wages. In turn that helps to redistribute income in favor of those now sharing less in the abundance that a developed society creates. Let the marketplace act in the favor of the working class. Tactically such a program can be implemented at various levels. First the shorter work week can be the subject of bargaining between employer and employee at the level of the individual enterprise, with supporting strikes and boycotts. For that no legislation is needed which should be pleasing to those who claim to be interested in less government intrusion. Second, the struggle can be waged at the level of state legislatures and Congress. Here the ballot box can be used to reward legislative allies and punish foes.

Finally a look around will tell you that Americans are harassed, with little time for themselves and their loved ones. And more leisure time is badly needed for an overworked and overstressed population with little time for exercise and relaxation so critical to good health and a good life. The cry of “back to the factories” is a call to return to the past, a far less productive and prosperous past at that.

  1. The Bureau of Labor Statistics (BLS) provides different numbers for “manufacturing” than does the Census for “production.” Thus in 2010 according to the BLS, the number employed in “manufacturing” constituted about 8% as opposed to 6% of the labor force as calculated from the Census data above. It seems worthwhile to use Census figures when possible since they are more direct and therefore less controversial. But a difference between 8% and 6% does nothing to alter the essential point being made. Manufacturing is a declining source of employment in a modern, developed economy. And that will not change.
  2. According to the careful work of ShadowStats, the unemployment rate is in the range of 23% and growing.

John V. Walsh can be reached at John.Endwar@gmail.com